Health care on the chopping block in an age of austerity

Bob Moon: In Washington, Medicare cuts are back on the table. As the debt-ceiling deal heads to the Senate for a vote this morning, health care companies are looking out for the knife. The bill in Congress creates a bipartisan commission assigned to find 1.5 trillion dollars in deficit cuts over the next 10 years. Medicare is one of the programs expected to be in the cross hairs for cuts. Likely trims? Payments to doctors, nursing homes and other Medicare providers. But while Washington argues over the specifics, we got a whiff of the dismal mood in the health care business yesterday -- some nursing home stocks were down over 50 percent.

Gregory Warner joins us live from our Health Desk at WHYY in Philadelphia. Gregory, how is it that nursing homes are taking a hit here?

Gregory Warner: Well, this wasn't directly part of the debt ceiling deal, though it may say a lot about the changing mood in Washington, but this story actually starts back in October when Medicare changed the way it pays nursing homes. So instead of paying them per procedure, they said, OK, put your patients in categories. Medium-need patients, high-need patients, ultra-high. And the higher the need, the more Medicare will pay. So, what happened, immediately, out of the blue, the number of medium-need patients dropped, and high and ultra-high patients shot up and Medicare was shelling out an extra $2 billion to nursing homes on a proposal that wasn't supposed to add anything to the budget. So, Medicare announced it would be cutting its rates by almost $4 billion next year ans stocks reacted.

Moon: How did that seemingly small change though, hurt the healthcare industry and their stock prices so much?

Warner: Well, I mean $4 billion isn't small, but I think it brings us back to the debt deal. Because in this case, nursing homes, really expected to soften the cuts, but lobbying didn't really work this time as expected, so now the healthcare industry is eying Washington's new cost-cutting move -- looking at that $1.5 trillion in proposed cuts next year, and they're wondering how much are we going to be carrying on our backs.